New market ignites biofuel expansion

Less than six months after cranking out their first batch of biodiesel, Alan Begley and Sam Gray have sealed the largest deal ever for a biodiesel producer in the state of North Carolina.

Smoky Mountain Biofuels, based in Jackson County, will sell biodiesel to 23 Mountain Energy gas stations across a seven-county region starting this summer. Begley and Gray are among the first in the southeast to mass produce biodiesel destined for the average consumer.

Biodiesel got its start several years ago as a counter culture movement. It was produced in small batches in a co-op setting by a circle of friends primarily for their own use. Any surplus was available to the public if they were willing to make a special trip and pay higher prices to fuel up.

“We’ve been trying to make a different model for biodiesel all along,” said Begley, president of Smoky Mountain Biofuels. “We wanted to get it to the public and make the price right so they would buy it.”

Despite the early signs of success, Smoky Mountain Biofuels is still a fledgling company. Begley and Gray pay themselves minimum wage. Neither was too thrilled about a state law passed last year to increase the minimum wage, unsure where they would come up with the money to give themselves raises.

Like true entrepreneurs, they know their efforts will pay off in time, however. Their mission now is to create demand. To do that, they are determined to offer biodiesel at the pumps at the same price as regular diesel, which largely is unheard of.

To keep the price down for consumers, Smoky Mountain Biofuels will sell biodiesel to Mountain Energy at just enough to cover their costs. The plan is to hang in there with razor thin margins until 2008, when a state biofuels incentive kicks in. Under the incentive, Smoky Mountain Biofuels will be refunded state gas taxes paid on their biodiesel.

“That’s the only reason we can pull this off,” Gray said. “The playing field will be level.”

Thomas Morgan, owner of Mountain Energy, lauded the state for being “forward-looking” on biofuels.

“They are coming up with what I consider to be an economic solution rather than a political solution,” Morgan said of the state incentive program.

Expansion afoot

Smoky Mountain Biofuels will have to expand their operation nearly five-fold to meet the demand Morgan is predicting at his gas stations.

“Thom’s plan is to buy every drop we can make,” Begley said.

New equipment has been ordered to ramp up production at their current site from 1 million gallons a year to 3 or 4 million. But there’s not enough room for all the volume they need. They will open a second plant in coming months to handle even more production. More than one county is courting Smoky Mountain Biofuels in hopes of landing the plant in their county, and Begley and Gray are weighing their options. They will continue to produce at the Jackson site after opening a second facility.

The new plant will have plenty of room for expansion. The equipment at the new site will be able to produce up to 15 million gallons a year.

“This new facility will be able to meet any demand thrown at us,” said Gray.

Morgan’s 10-year contract with Smoky Mountain Biofuels allowed Gray and Begley to safely sink capital into the new plant and equipment.

“We have to have the demand,” Gray said. “Mountain Energy through their 10-year contract with us is giving the region a consistent source of biodiesel blend well into the future.”

While the contract with Mountain Energy marks the first major deal to bring biodiesel to the average consumer, Smoky Mountain Biofuels has been selling biodiesel to government equipment fleets since their operation launched last November. Swain County government, Jackson County government, the Eastern Band of Cherokee Indians and the Great Smoky Mountains National Park use biodiesel to fill everything from trash trucks to school buses. The town of Waynesville also is thinking about making the switch for the town’s diesel fleet, from street cleaners to electric utility trucks.

All biodiesel is not created equal, according to biodiesel users. But Smoky Mountain Biofuels produces a top quality fuel. They use only pure vegetable oil, not used vegetable oil. The biofuel co-ops pick up used oil from fast-food restaurants, but it is doesn’t run as well, plus it’s not feasible for mass production on a large scale, said Begley.

U.S. Rep Heath Shuler, D-Waynesville, commended Smoky Mountain Biofuels for their entrepreneurial spirit and environmental ethos during a press conference last week announcing the deal.

“We should leave our children and our grandchildren with the world God blessed us with in a better state than we found it,” Shuler said.

Shuler also commended Jackson County leaders, who played a major role in helping Smoky Mountain Biofuels get started. The biodiesel plant is located at the Jackson County Green Energy Park. There, methane gas is being tapped from an old county landfill and converted into energy, which in turn is used to make the biodiesel. So even the production of the biofuel is a “green” undertaking.

Smoky Mountain Biofuels has won three awards in the past three months. One was from the U.S. Environmental Protection Agency for using landfill gas to power a biodiesel facility. Another was the “The North Carolina Alternative Fuels Leadership Award” presented by the state energy office. Another was awarded to Jackson County government by the Association of County Commissioners for supporting Smoky Mountain Biofuels.

“You’ll have to build a trophy room for all the awards you’ll continue to see,” Shuler told them.

What is Biodiesel?

Biodiesel is a blend of diesel and vegetable oil. Any diesel engine can take biodiesel. It does not take a special engine or modifications. You can switch back and forth between biodiesel and regular diesel without hurting the engine.

Biodiesel has various blends. B10 is 10 percent vegetable oil, B20 is 20 percent vegetable oil, etc. The rest of the blend is regular diesel.